American Energy Companies Continue to Shed Canadian Assets

Devon Energy Corp. (NYSE:DVN) and Williams Companies Inc. (NYSE:WMB) are selling Canadian assets.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Over the past several years there has been a notable trend in the North American energy sector: American energy companies are jettisoning their Canadian assets.

That trend continued to play out this past week when U.S.-based oil and gas producer Devon Energy Corp. (NYSE:DVN) sealed a deal for its stake in an oil pipeline.

Following that transaction was a report that the auction of American energy infrastructure giant Williams Companies Inc.’s (NYSE:WMB) Canadian unit attracted at least seven bidders. This deal news suggests that U.S. energy companies continue to see better opportunities by cashing in their Canadian assets, so they can focus on growing in their home country.

Access to additional capital granted

Devon Energy announced the sale of its 50% stake in the Access Pipeline in the Canadian oil sands region to Canada Pension Plan Investment Board–backed Wolf Midstream. The initial sale price was $1.4 billion, though it includes the potential for Devon to earn an additional $150 million after it sanctions the development of a new project on its Pike oil sands lease. That is noteworthy in and of itself because it suggests that Devon Energy has plans to grow its presence in the oil sands.

That said, this is not the first time the company has jettisoned assets in Canada. In 2014 the company sold its conventional assets in the country to Canadian Natural Resources for $3.125 billion. That transaction represented the entirety of its conventional business in Canada. However, the company did retain its shale gas assets in the Horn River, its heavy oil assets at Lloydminster, and its oil sands assets in Alberta.

While Devon Energy retained assets that had the most upside, it cashed in on those that did not to reinvest the proceeds into its U.S. shale business. For example, the proceeds from the sale to Canadian Natural Resources were used to pay for its Eagle Ford shale acquisition, while the sale of its stake in the Access Pipeline will go towards accelerating the development of its STACK and Delaware Basin resource plays.

Cashing out

Meanwhile, Williams Companies is reportedly well advanced in the sale process for its Canadian assets. The company owns a unique slate of assets, including the only fractionator in Canada capable of processing offgas liquids found in the oil sands. To date, the company has invested US$2 billion in building its Canadian assets, and it has another US$2.8 billion in future investment opportunities.

That said, according to reports, the company’s Canadian assets are only expected to sell for between US$1 billion and US$2 billion. This is due in large part to the impact of low oil prices, which cut into the margins of Williams Companies’s Canadian operations by $89 million last year.

Aside from the impact of low oil prices, the other reason Williams Companies is looking to sell its Canadian assets is that it needs the cash to fund growth in the states. Earlier this year the company and its MLP had to cut US$1 billion out of the capex budget due to lack of resources; it also needs to sell at least US$1 billion of assets to bridge the gap between the budget and capital resources. It is a gap the company appears poised to fund via the sale of its Canadian assets.

Investor takeaway

American energy companies continue to return home slowly. For the most part, it is not that they don’t see growth potential in Canada, but that they need the money to fund the abundant opportunities they have in their own back yard. It is a trend that will likely continue because all but the biggest U.S. oil companies appear content to operate within their own borders.

Should you invest $1,000 in Lucid Group right now?

Before you buy stock in Lucid Group, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Lucid Group wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,391.46!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*.

See the Top Stocks * Returns as of 1/7/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool owns shares of Devon Energy.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Energy Stocks

A worker overlooks an oil refinery plant.
Energy Stocks

Got $2,500? 3 Energy Stocks to Buy and Hold Forever

Along with capital gains, many Canadian energy stocks often pay dividend or enhance shareholder value through share buybacks.

Read more »

Oil industry worker works in oilfield
Energy Stocks

Canadian Investors: Should You Buy Canadian Natural Resources Stock While Under $50?

If there's one thing I love, it's a deal. And right now, CNQ stock looks like it could be a…

Read more »

Trans Alaska Pipeline with Autumn Colors
Energy Stocks

Better Pipeline Stock: Enbridge vs. TC Energy?

Enbridge and TC Energy are two pipeline stocks that offer shareholders tasty dividend yields in January 2025.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

2 TSX Stocks to Invest $20,000 and Create $2,597.60 in Passive Income

Need income? We got you, with these two top dividend stocks due for more solid growth and passive income.

Read more »

money cash dividends
Dividend Stocks

Trump Tariffs: 1 TSX Stock That Could Take a Huge Hit

This TSX stock hopes to improve shareholder returns in 2025 but could take a huge hit instead from Trump’s tariffs.

Read more »

canadian energy oil
Energy Stocks

Invest $21,000 in 1 Dividend Stock and Create $1,224 in Passive Income

This one dividend stock is a great option for those looking toward the future, with growth opportunities and dividends on…

Read more »

bulb idea thinking
Energy Stocks

What to Know About Canadian Energy Stocks in 2025

Energy stocks like these look promising in 2025, but there are still a few items investors need to watch.

Read more »

oil and natural gas
Energy Stocks

3 Top Energy Sector Stocks for Canadian Investors in 2025

These energy companies have a solid business model, generate growing cash flows and pay higher dividends to their shareholders.

Read more »